Whitepaper

AsmoothtransitionfromWiMAXtoLTEwith dualmodedevices
Howoperatorscanreduceupfrontcostsandgainflexibilityasthey migratetoLTE

SubscriberdevicesthatsupportbothWiMAX andLTEprovideWiMAXoperatorsmultiple benefits: Increasedflexibilityinmanagingthe timingoftheirtransitiontoLTE Lowerfundingrequirementsatthe beginningofLTEtransition,duetoamore gradualdeploymentofLTEinfrastructure, with19%capexandopexreduction duringthefirstyearofLTEdeployment Longerandmoreefficientuseofexisting WiMAXnetworkresources EasierintroductionofLTEdevices,which reducesoreliminatestheneedfordevice subsidiesandforceddevicereplacements whentheWiMAXnetworkisswitchedoff Costsavingsof4%overfiveyears,dueto increasedefficiencyinusingavailable resourcesandtolongerlifespanof devicesinthemarket

WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

1. TheroleofdualmodedevicesinthetransitiontoLTE
WorldwideInteroperabilityforMicrowaveAccess(WiMAX)hasgivengreenfieldoperatorstheopportunitytolaunchwireless broadbandservicesincountlessmarketsinemerginganddevelopedcountries,inurbanandruralenvironments,asfixed broadbandserviceorasamobileservice.Meanwhile,manylongerestablishedWiMAXoperatorshavedecidedtotransitiontoLong TermEvolution(LTE)becauseofthewidesupportforthenewtechnologyandespeciallyforitstimedivisionLTE(TDLTE)version,a radioaccesstechnology(RAT)verysimilartoWiMAXandtheadvantagesofconvergingtoasingletechnology. Withtheexceptionofsomeverticalnichemarkets,mostWiMAXoperatorswillmigratetoLTE,butthepaceandmodalitiesofthe shiftwillvarygreatlydependingongeography,servicefocus,spectrumavailability,andfunding.SomeoperatorswanttomovetoLTE asquicklyaspossible,asthiswillopennewmarketsandbusinessopportunitiestothem.ThisisthecaseatYota.TheRussianoperator hasannouncedplansforaquicktransitiontoLTEthatwillenableittobecomeawholesaleoperatorprovidingotheroperatorsaccess toitsnetwork.MostoperatorsaremovingtoLTEatamorerelaxedpace.Mostoperatorsthataremorefocusedonfixedservices havenotannouncedtheirLTEplansyet;theyarelikelytodelaythemovetoLTEuntilthetechnologyhasmaturedandtheecosystem isestablished.Inthemeantime,theyarebetteroffcontinuingtoexpandtheirWiMAXfootprintandgainmarketshare. Regardlessoftheurgencyofthetransition,operatorsareassessingtheimpactofthetransitionontheirnetworks,subscribersand cashflow,exploringthebenefitsofdifferenttransitionmodels,andunderstandinghowtheycanprepareforthetransition.This preparatoryworkisessential.Whiletheavailabilityofupgradablebasestationsanddualmodedevicesmakesitpossiblefor operatorstoswitchtoLTEwithoutreplacingentirenetworks,thetransitionwillundoubtedlybedisruptiveandrequireconsiderable effortfromtheoperatorstoensureservicecontinuity,especiallyforoperatorswithtightlylimitedspectrumassets. Toensureasmoothtransition,operatorsneedtodevelopadevicemigrationstrategythatcomplementstheradioaccessnetwork (RAN)transition.Dualmodedevicesroleinthiscontextistocontainthepotentialfordisruption,andoptimizetheutilizationof existingnetworkresources.Dualmodedevicesaremoreexpensivethansinglemodedevices,buttheycanprovidefinancialbenefits thatsignificantlyoutweighthesecosts.Withthem,operatorscanusetheir existingnetworkinfrastructurelongerandbuildtheirLTEnetworkmore ThenetworkmigrationtoLTEisgoingtobe slowly.Operatorswillbeabletomigratesubscribersorganicallytonew complicatedbecauseweneedtodeployWe devicesattheendofthelifespanofthedevicesinuse,insteadofexecutinga cannotswitchoffonenetworkandswitchonthe massivedevicesubstitutionprogram.Theresultingcapexdeferralandmore othernetwork,sotherewillbeaperiodwhenthe limitedneedtosubsidizedeviceupgradeswilltranslateintocostsavingsand twonetworkswillworkatthesametime,butwe abettercashflowtotheoperator. understandthatthis[transition]periodwillbetwo tothreemonths.Ofcourseitisgoingtobeanissue InthispaperweexploreissuesfacedbyWiMAXoperatorsplanningtomove ofdevices,becausetherearealreadymany toLTEandevaluatingitsdevicestrategy.Atotalcostofownership(TCO) WiMAXdevicesinthemarketthatwillnotsupport modelillustratestheimplicationsofdifferentwaystotimethetransitionby LTE,butwewillmakeaspecialmigrationpolicyto employingdifferentcombinationsofsinglemode(WiMAXorLTE)anddual helpourcustomerstomove. modedevices(WiMAXandLTE),andquantifiestheimpactoninfrastructure DennisSverdlov,CEOatYota capexandopexandondevicereplacementcosts.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

2. Transitionoptions:networkanddevices
ThedecisionbetweentheTDLTEandfrequencydivisionduplex(FDD)LTEversionsisoftendictatedbyspectrumassetsand regulatoryconstraints.FundingavailabilityandecosystemmaturitysubstantiallyconstrainwhentheLTEtransitionwillstart.From networkanddeviceperspectives,however,operatorshavemultipleoptions.Someofthemostcommontransitionpathsarelistedin Table1. Table1.ThetransitiontoLTE:Options TheoperatorswitchesfromWiMAXtoLTEwithoutestablishingatemporaryoverlaynetwork. Spectrum:Thisoptionislikelytobeselectedonlybyoperatorsthathaveinsufficientspectrumtosupportboth WiMAXandLTE,becausethistransitionmodelisthemostexpensive,disruptive,andfraughtwithrisk. Nooverlay Network:TheexistingWiMAXinfrastructurehastobedisposedof,unlessupgradableequipmenthasbeeninstalled. Nevertheless,operatorsmayneedtoaddnewWiMAXbasestationsduringthetransition,toincreasecapacity becausetheoperatorssubscriberbaseisgrowing. Devices:TheoperatorhastoreplaceallWiMAXdeviceswithLTEdevicesinanextremelyshortperiod,makingthe transitionaverydemandingandexpensivecustomerserviceprocess. ThistransitionmodeliswellsuitedtooperatorsthatintendtomovetheirsubscriberstoLTEquickly,over23months. Insomecasesthisprocessmaybecarriedoutatadifferenttimeineachmarket.Unlessdualmodedevicesareused, however,amarketbymarkettransitionlimitssubscribersabilitytoaccessthenetworkoutsidetheirmarket. Fast transition Spectrum:Thismodelisbestsuitedtooperatorswithlittlespectrum,forwhichaprotractedtransitionmayresultin aninefficientuseofresources,especiallyifdualmodedevicesarenotused. Network:WiMAXbasestationsaredecommissionedquicklyand,asinthenooverlayscenario,theoperatormay needtoincreasetheoverallnumberofbasestationsfasterthaniftheWiMAXnetworkwerelefton. Devices:UnlesstheoperatordeploysalargenumberofdualmodedevicesbeforestartingitsLTEdeployment,the replacementoflegacyWiMAXdevicesinashortperiodisgoingtobecostlyandchallenging. Thisistheoperationallyeasiestandmostcosteffectiveoptionformostoperators,becauseitallowsthemtoleverage theexistingWiMAXinfrastructureforafewyears,andtomanagethesubscribertransitiontonewdeviceseffectively. TheTCOmodelpresentedinthispaperisbasedonthistransitionoption,assumingthattheoperatorwilloperatethe WiMAXandLTEnetworksfortwoyears. Gradual transition Spectrum:OperatorswillmovefromWiMAXtoLTEgraduallybychangingtherelativesplitbetweenthetwo technologies.Atthebeginning,withfewLTEsubscribers,mostspectrumwillremainallocatedtoWiMAX.Later,the operatorwillassignmorespectrumtoLTEasrequiredbysubscribers. Network:Attheendofthetransitionperiod,WiMAXbasestationsaredisconnectedorupgradedtoLTE. Devices:Unlessdualmodedevicesareused,theoperatorhastoreplacedevicesasdictatedbynetworkavailability andcapacity.InareaswhereLTEprovidesmorecapacitythanWiMAX,theoperatormayneedtoswitchsomeWiMAX subscriberstoLTEtomakesuretherearesufficientnetworkresourcesavailabletothem.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

LTEdeploymentiseithercomplementarytoWiMAX,targetingareaswheretheoperatorneedstoincreasecapacityor expandcoverage,oritistreatedasacompletelyseparatenetwork. Longterm coexistence Spectrum:Thisoptionislimitedtooperatorsthathavesufficientspectrumtosupporttwonetworksinthemediumto longterm. Network:TheWiMAXnetworkcontinuestooperatesidebysidewiththenewLTEnetwork. Devices:UnlesstheoperatorisexclusivelyprovidingfixedserviceandWiMAXandLTEareofferedindifferent markets,dualmodedevicesprovideagreatadvantageandcostsavingopportunityinthiscase,becausetheyallow subscriberstohaveaccesstotheentirenetworkservedbythetwoRATs. WeassumethatinallcasestheoperatorwilleventuallyrunanLTEonlynetwork,andthatthemaindifferenceamongoptionsisthe lengthofthetransitionperiodduringwhichbothWiMAXandLTEoperate.Generally,afastertransitiontoLTErequiresmoreupfront effortandinvestmentthanaprotractedoneinwhichsubscriberscanusebothnetworkslongerandmovetonewLTEdevices gradually.Althoughlessdisruptive,longertransitionperiodsareoftennotsuitable,though,becausetheyrequirespectrumassetsthat mostoperatorsdonothave. Fromadeviceperspective,theoperatormustdecidewhethertousesinglemodedevicesonly,oramixofsinglemodeanddual modedevices(Figure1).Whenanoperatoroptstodeployonlysinglemodedevices,subscriberscanuseonlyonenetworkatatime. InthiscasedevicereplacementhastofollowtheLTEdeploymentclosely,toaverttheriskofcongestionononenetworkwhilethe otherisunderutilized.Withdualmodedevices,operatorshavemoreflexibilitytoplanthetransitionasdesired,andtousenetwork resourcesmoreeffectively.

Figure1.DevicestrategiesforthetransitiontoLTE:Singlemodecaseanddualmodecase(bottomtwobars),mappedagainstthe networktechnologytransition(topbar).Source:SenzaFiliConsulting

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

Mobiledevicesincreasinglysupportmultipleradiointerfaces,becausethisisarequirementtogetthebestcoverageandthroughput innetworksthatarenolongerashomogeneousastheearlyGlobalSystemforMobileCommunications(GSM)orCodeDivision MultipleAccess(CDMA)networks.Todayssmartphonestypicallysupportsecondgeneration(2G)technologieslikeGSM,third generation(3G)technologieslikeHighSpeedPacketAccess(HSPA),andWiFi.SmartphonesliketheHTCEVO4GsupportWiMAXin additiontocellularandWiFiinterfaces. DualmodedevicesthatsupportbothWiMAXandLTEfitwellwithinthistrendtowardmultipleinterfaces,butwithanadded advantage.BecauseWiMAXandLTEshareanoverlappingradiointerfaceand,inmostcases,WiMAXoperatorsmovingtoLTEplanto usethesamespectrumband,supportingbothinterfacesiseasierandlessexpensivethanaddingafundamentallydifferentone. Substantialcostsavingscomefromtheuseofasinglebasebandchipsetandsharedradiofrequency(RF)componentsforboth WiMAXandLTE.Inthedevicemarket,wherevolumedictatesthecommercialviabilityofaproduct,thesecostsavingsandtheability toreusecomponentsareessentialtocreatingacoststructurethatwillmakethesedevicesattractivetomanufacturersandcost effectiveforoperators,eventhoughthemarketfordualmodeWiMAX/LTEdevicesisonlyasubsetoftheLTEmarket.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

3. TCOmodelforsinglemodeanddualmodedevices
TounderstandthecostdriversbehinddifferentdevicestrategiesanddeterminewhetherWiMAXoperatorsstandtobenefitfromthe useofdualmodedevices,wepresentaTCOmodelbasedonaWiMAXoperatorofmediumsizethathaslaunchedserviceoverthe pastfewyearsandplansatransitiontoLTE.ThekeyassumptionsfortheoperatorarelistedinTable2,withthetimelineshownin Figure2. Table2:AssumptionsforWiMAXoperatorinTCOmodel Period WiMAX network Fiveyears. Theoperatorhasacommercialnetworkwith3,000WiMAXbasestations,eachwithacapacityof50Mbps.Network utilizationissetat20%atthebeginningofYear1.DuringYear1,WiMAXbasestationsmaybeinstalledtocopewith subscriberdemand. TheoperatorstartsbuildingouttheLTEnetworkinYear2andthetransition,duringwhichbothLTEandWiMAXare available,laststwoyears.AttheendofYear4,theLTEnetworkcoverstheentireWiMAXfootprint,andtheWiMAX networkisturnedoff.Networkutilizationissetat33%inYear5(asareferencepoint,Vodafonenetworkutilization inEuropeis36%). 500,000subscribersatthebeginningofYear1,growingto1.9millionbyYear5,assuminganannualgrowthof40%. Churnissetat4%. Onaverage,adonglesubscribergenerates10GB/month,asmartphonesubscriber2GB/monthinYear1.Traffic increaseperyearis10%fordongleusersand20%forsmartphoneusers. InYear1,50%ofsubscribershavedongles,50%smartphones.ByYear5,thesplitis20%/80%betweendongleand smartphoneusers. Devices InYear1,theaveragesellingprice(ASP)forsinglemodedonglesisUS$50;forsinglemodesmartphonestheASPis US$400.DualmodedevicescostanadditionalUS$10inYear1,andUS$7inYear5.Thepricedeclineperyearis8% fordonglesand6%forsmartphones(bothsinglemodeanddualmodedevices).Lifespanfordonglesisthreeyears; forsmartphonesitisfouryears. US$140,000perLTEbasestation,includingequipment,installation,andcommissioning. TheannualcosttooperateabasestationisUS$41,000.Thisincludesmaintenance,rent,power,andrecurring backhaulcharges. StartinginYear1,allolddevicesattheendoftheirlifespanarereplacedwithdualmodedevices,untiltheWiMAX networkisshutdown.Atthispoint,allnewdevicesaresinglemodeLTEanddonotsupportWiMAX. AssoonastheLTEnetworkisdeployed,allnewdevicesaresinglemodeLTEdevices.WhentheWiMAXnetworkis switchedoff,allWiMAXdevicesarereplacedwithLTEdevices.

LTEnetwork

Subscribers Traffic

Capex Opex Dualmode case Singlemode case

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

Figure2.TimelineoftransitiontoLTEintheTCOmodel.Source:SenzaFiliConsulting Themodelcomparestwocases: Singlemodecase:theoperatorusesonlysinglemodedevices,switchinggraduallytoLTEdevicesasitdeploysthenetwork. Dualmodecase:theoperatorstartsintroducingdualmodedevicesduringYear1,aheadoftheavailabilityofLTE,tofacilitate thetransition.

Thetransitionwilltakeplaceovertwoyears,duringwhichboththeWiMAXandLTEnetworksareoperational.WhentheWiMAX networkisswitchedoffinYear4,allWiMAXsinglemodedevicesarereplaced,butdualmodedevicesarestillinuse,eventhoughthe adoptionofnewdualmodedevicesisdiscontinued. Forsimplicity,themodelassumesthatnewLTEbasestationswillbeinstalled.Formostoperators,atleastsomeoftheirexisting WiMAXbasestationsarenotupgradabletoWiMAX,sonewbasestationsareoftenrequired.Furthermore,mostofthenewLTEbase stationsaredeployedduetoincreasedtrafficloads,andupgradeswouldnotsuffice.FortheoperatorconsideredintheTCOmodel,in thebestcaseonlyasubsetoftheLTEnetworkwillbetheresultofRANupgrades.Inthisscenario,weexpectthecapextobelower (withthedifferencedependingonthetypeofupgradeavailable),butthecostdriversremainthesame. Whilethespecificresultsaretiedtoourmodeloperators,weexpectthecostdriversandhighlevelresultstobehighlycomparable acrossoperatorswhensizeandotheroperatorspecificparametersandassumptionsaretakenintoaccount.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

Figure3.Devicetypesinuseamongsubscribersinthedualmodeandsinglemodecases.Source:SenzaFiliConsulting TheTCOmodeliscapacitydriven.Theexpectednumberofsubscribers,thetraffictheygenerate,andthedevicestheyuse(Figure3) determinethenumberofLTEbasestationsthattheoperatordeploys,andwhen(Figure4).Withanincreaseinthenumberof subscribers,theWiMAXnetworkmightnolongerbeabletomeetthetrafficload,andtheoperatorwouldthenneedtoreplacesome WiMAXdeviceswithdualmodeorLTEsinglemodedevices,aforcedsubstitution,toprovidesufficientservice.1Theinfrastructure capexandopex,aswellasthedevicereplacementcosts,aredirectlydrivenbythroughputrequirements.Forsimplicity,weassume thattheinitialWiMAXfootprintissufficienttoprovidecoverageandthattheLTEnetworkisplannedtobecoextensivewithitthat is,theoperatordoesnotneedtoinstalladditionalLTEbasestationsforcoverageonly. ThetotalnumberofLTEbasestationsneededinYear4andYear5isthesameforboththesinglemodeanddualmodecases because,atthispoint,theWiMAXnetworkisnolongeroperativeandthetrafficloadisthesameregardlessofwhethersinglemode ordualmodedevicesareused.Similarly,inYear1,noLTEbasestationisdeployedineithercase.Thedifferencebetweenthetwo

Figure4.LTEbasestations:newandtotalcount.Source:SenzaFiliConsulting

1.Weassumethat,duringthetransitionperiod,theoperatorwillnolongerdeployWiMAXacrosstheentirefootprint

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

casesissubstantial,however,inYear2andYear3.Inthesinglemodecase,theoperatorneedsmorebasestationsdeployedinboth years,becauseallnewsubscribersandallsubscriberswithanewdevicecanaccessonlytheLTEnetwork. Asaresult,inthesinglemodecasetheexistingWiMAXnetworkisunderutilizedduringthetransition(37%ofWiMAXcapacityis unusedinYear3)becausethenumberofWiMAXdevicesislimited.TheoperatorcouldchoosetosupportmoreWiMAXdevices duringthetransitiontoincreaseWiMAXnetworkutilization,butdoingsowouldcreatetheneedforalargernumberofforceddevice substitutionswhentheWiMAXnetworkisswitchedoffinYear4,andthisapproachisnotlikelytobecosteffective. Thetimelineofthedeploymentdifferssubstantiallyinthetwocases.Inthesinglemodecase,theoperatorhastodeployalmost seventimesasmanybasestationsinYear2asinthedualmodescenario,and38%moreinYear3,tomeetsubscriberdemand.2As wewillseeinthenextpages,thishasamajorimpactonthecapexcashflowfortheLTEbuildout.InYear4,thebalanceisreversedin thedualmodecase,withtheoperatorhavingtocompensateforthesmallernumberofbasestationsdeployedinYear2andYear3 (comparedtothesinglemodecase)tocompletetheLTErollout. ManyoperatorsarelikelytodeployLTEinnewmarketsastheytransitiontheirWiMAXnetworkstoLTE.Tokeepourfocussolelyon thetransitionfromWiMAXtoLTE,deploymentactivitybeyondtheWiMAXfootprintinnotincludedintheTCOmodel.Furthermore, theTCOmodeldoesnottakeintoaccountanycapacityincreasethatmaybeneededtoaccommodateroaming,wholesale,machine tomachine(M2M),orothertrafficnotgeneratedbytheprojectedsubscribers. TheTCOmodelassumesthatoperatorsusedualmodedeviceswithasinglebasebandchipsetthatsupportsbothWiMAXandLTE,in bothTDDandFDDvariants;thisislessexpensivethanusingonechipforWiMAXandasecondchipforLTE,soweexpectoperatorsto providesinglechipsetdualmodedeviceswheneverpossible.ThisassumptionintheTCOallowsustokeeptheincrementalcostof addingthesecondRATinterfacetoUS$10.

2.OfcoursetheoperatormaydecidetodeployLTEbasestationsmorequickly.InthiscasethecostsavingswillbemoreevenlydistributedacrossYear2andYear3,but thedifferencedisappearsbyYear4andYear5,whenthetotalnumberofLTEbasestationsisthesame.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

4. Comparingcostsinsinglemodeanddualmodecases
Theadoptionofdualmodedevicesresultsincostsavingsforoperators(Figure5),mostlydrivenbyamoregraduallypaced deploymentofLTEbasestationsanddevices,andbythemoreextensiveuseofexistingWiMAXnetworkresourcesduringthe transition.Figure5showsacomparisonofcostsforthetwocasesandthecostsavings(asapercentageofcumulativecostsuptoany givenpointinthetimetable)thataccruetooperatorsadoptingdualmodedevices.Forallcostdriversinthedualmodecase,the cumulativepercentageincostsavingsdecreasesovertime,becausecostsshifttowardthesecondhalfofthefiveyearperiod.Asa result,theoperatorinadualmodecaseseestwoeffects:ashiftforwardinthecashflow(whichcanbecalculatedbytheyearlyopex andcapexinFigure5)andoverallcumulativecostsavings(i.e.,thepercentageincumulativecostsavingsinYear5inFigure5).

Figure5.Financialsummaryofthesinglemodeanddualmodecases.Positivecostsavingsvaluesdenotelowercostsforthedual modecase.Source:SenzaFiliConsulting

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

Thebiggestimpactisgeneratedbyinfrastructurecapex,withcumulativecostsavingsof55%inYear2.Ofcourse,thecumulativecost savingsdisappearinYear4andYear5,becausetheoperatorhastodeploythesameoverallnumberofbasestations.Postponingthe capextoatimewhentherearemorepayingsubscribersandspreadingouttheeffortsovertimearehugeadvantagestomost WiMAXoperatorsespeciallybecausemanyofthemaregreenfieldoperatorswithlimitedaccesstocapitaland,especiallyin emergingmarkets,limitedengineeringresourcesfortherollout.Asaresult,operatorsmayseeadditionalcostssavingsduetothe moreefficientuseofstaffresources,whichTCOthemodeldoesnotincludebecausetheyarehighlydependentontheoperators environment. Morelimited,butstillsubstantial,costsavingsinthedualmodecasecomefromtheopexoverthefiveyearperiod,peakingatYear3, whentheoperatorhastosupportahighernumberofactiveWiMAXandLTEbasestations.DuringYear4andYear5,theopexisthe sameinbothcasesbecausethesamenumberofbasestationsisactive;but,unlikeinthecapexcase,thereisaresidualcumulative costsavinginYear5opexbecauseofthehighernumberofbasestationsduringYear2andYear3.Thecumulativeopexsavingspeak at13%inYear3anddiptoslightlyover8%byYear5. Thetimingofcostsavingsfordevicesisdifferentfromthatforinfrastructure.Thedevicecosts3inFigure5include: OrganicdevicereplacementsthatwouldhavetakenplaceregardlessoftheLTEdeployment(herethedifferencebetweenthe twocasesistheadditionalmarginalcostofUS$10fordualmodedevices). ForcedreplacementsthatprovidesubscriberswithnewdevicesastheWiMAXnetworkisturnedofforhasinsufficientcapacity.

Duringthefirstthreeyears,onlyorganicdevicereplacementsareneeded,inthesamenumbersforboththesinglemodeanddual modecases.Sincethedualmodedevicesaremoreexpensive,duringtheinitialthreeyearsthedualmodecaseentailsahighercost (4%inYear2andYear3)thanthesinglemodecase.Inthelasttwoyears,thebalanceisreversed,asthesinglemodecaserequires forcedreplacementsandthedualmodecasedoesnot.Asaresult,inYear4theoperatorhastoreplace36%moredevicesinthe singlemodecasethaninthedualmodecase,leadingtoacumulativecostsavingsof6%inYear4.Thispercentagedropsto4%in Year5,asthenumberandcostofreplaceddevicesisthesameforbothcases.Becausefewerdevicesarereplacedinthedualmode case,itscostoftransitioningsubscriberstoLTEislower. TheTCOmodelcomparesthetotalcostofdevicereplacementforbothorganicandforcedreplacements,anddoesnottakeinto accounttheimpactofdevicesubsidies.Actualcostsavingsinthedualmodecasemaybesubstantiallyhigheriftheoperatordecides tosubsidizeforcedreplacements.Thisisverylikelyiftheoperatorwantstokeepchurndownmostsubscriberswillnotbewillingto payforadevicewhentheircurrentoneworkswellandthechangeisrequiredbytheoperatorsupgradeplans.Becausethedual modecaseentailsfewerforcedreplacements,ittranslatesintolowersubsidiesandahigherpercentageoftotaldevicecostspaidfor bysubscribers. Thesourcesofcostsavingsinthedualmodescenariovarythroughtime.InYear2,81%ofcostsavingscomefromcapexand23% fromopex,anddevicesactuallyadd5%tothecosts.InYear5,costsavingsaresplitbetweeninfrastructureopex(74%)anddevices (26%).

3.TheTCOmodelincludestheadditionaldevicecostsassociatedwiththetransitiontoLTEwithoutmakinganyassumptionastowhethertheoperatorpaysforthem throughdevicesubsidies,orwhethertheyarepassedontothesubscribers.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

ThedeviceandinfrastructurefinancialsummaryinFigure5addstogetherthecostsavingsfrominfrastructurecapexandopexand devices,reflectingthetwomaincostsavingdriversinthedualmodecase: Duringthetwoyeartransitionperiod,theoperatorcandeploytheLTEnetworkmoregradually,thusreducingthesizeofthe initialinvestment.The19%costsavingsinYear2areduemainlytotheeffectofthepostponedcapex,whichhasalargeimpact onthecashflow.TheoverallcapexinvestmentbyYear5isthesameinbothcases,becauseregardlessofwhetherdevicesare singlemodeordualmode,theoperatordeploysthesamenumberofbasestations. Thedualmodecase,however,bringslongtermsavings(4%)despitethehighercostofthedevices,becausetheoperatorcan makedowithkeepingasmallernumberofbasestationsactive,thusreducingitscapex.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

5. Acomparisonacrosstransitionscenarios
IntheTCOanalysisinthepreviouspageswefocusedonabasecasescenarioinwhichtheoperatormigratestoLTEovertwoyears. Whathappensifwelookatadifferenttransitionperiod?Weexploredthisissuebycreatingfouradditionalscenarios,definedinTable 3,withtransitionperiodsrangingfromthreemonthstothreeyears,withanadditionaloneinwhichtheWiMAXnetworkiskept activethroughoutthefiveyearperiod. Thethreemonthtransitionisverychallengingintermsofresourcesandfunding,andwedonotexpectittobewidelyadopted. Similarly,thelongtermcoexistencescenarioislikelytobeconfinedtooperatorsthathavesufficientspectrumtooperatetwo networkssidebyside,oneusingWiMAXandoneLTE,andcandosoatalowopex. Acomparisonacrossscenarios(Figure6)showsthatthefastswitchscenarioistheleastaffectedbydualmodedevices(only1%cost savingsbyYear5).ThegraphontheleftinFigure6showstheyearlycostforthedualmodecaseonlytocomparethecashflow requirementsforoperatorschoosingadifferentlengthoftransitionperiod.Otherthingsbeingequal,theshorterthetransitiontime, thehighertheupfrontinvestmentis. Table3:Scenariodefinitions Fasttransitionoverthreemonths,withtheWiMAXnetworkturnedoffattheendofthetransitionperiod. Fastswitch Dualmodecase:dualmodedevicedeploymentstartsinYear1,withallWiMAXdevicesreplacedbyLTEdevicesby Year3. Singlemodecase:LTEdevicedeploymentstartsinYear2,withallWiMAXdevicesremovedbyYear3. LTEandWiMAXbothoperateduringYear2,withtheWiMAXnetworkdisconnectedinYear3. Oneyear transition Dualmodecase:DualmodedevicesintroducedinYear1,LTEdevicesinYear3.Dualmodedevicesarestillinusein Year5. Singlemodecase:LTEdevicesareintroducedinYear2.AllWiMAXdevicesarereplacedbyLTEonesbyYear3. Basecase,analyzedintheprevioussection.LTEandWiMAXbothoperateduringYear2andYear3,withtheWiMAX networkdisconnectedinYear4. Dualmodecase:DualmodedevicesintroducedinYear1,LTEdevicesinYear4. Singlemodecase:ByYear4alldevicessupportLTE. Threeyear transition WiMAXandLTEbothoperatefromYear2toYear4. Dualmodecase:DualmodedevicesintroducedinYear1,LTEdevicesinYear5. Singlemodecase:WiMAXandLTEdevicescoexistuntilYear4.NoWiMAXdeviceinuseinYear5. WiMAXandLTEoperatesidebysidefromYear2toYear5. Longterm coexistence Dualmodecase:DualmodedevicesintroducedinYear1andusedthroughYear5.LTEonlydevicesnotused. Singlemodecase:WiMAXandLTEdevicesoperatingfromYear2toYear5.

Twoyear transition

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

Figure6.Scenarioanalysis:percentagecumulativesavingsfordualmodecase,anddualmodecasecostsforinfrastructureand devicescombined.Source:SenzaFiliConsulting BecausethetimeduringwhichbothWiMAXandLTEnetworksareactiveissoshortinthefastswitchscenario,dualmodedevices havealimitedimpactineitherdeferringcapexorloweringopex.WhentheWiMAXnetworkisswitchedoff,mostdevicesstilluse WiMAXonly,andtheyneedtobereplaced.Dualmodedeviceswouldbringmorereliefiftheycouldbedeployedforafewyears aheadofthedeployment,butthisapproachcreatesanunnecessarydelayinthetransitiontoLTEasoperatorswaitforsubscribers toadoptdualmodedevicesorganicallythatoperatorsprefertoavoid. Attheotherextremeislongtermcoexistence.Itgeneratesthehighestcostsavings(12%byYear5).Thisisbecausethecontinueduse oftheWiMAXinfrastructurereducesthenumberofLTEbasestationstobedeployedandgivestheoperatormoreflexibilityto replacedevicesorganically. TheoneyeartransitionscenariodeliversthemostimpressivecostsavingsduringthetransitionphaseinYear2,astheoperator embarksonatransitionthatrequiresfewerbasestationstobedeployedinYear2thaninthefastswitchscenario.Asimilarbutless pronouncedeffectispresentinthetwoyeartransitionscenario. Thethreeyeartransitionscenarioscumulativecostsavingspatternduringtheinitialyearsissimilartothatoflongtermcoexistence, asthenetworkbuildoutisdrivenbythesametrafficrequirementsinbothscenarios.Thecostsavingsremainhigherforthelongterm coexistencescenariobecauseofthecontinueduseoftheWiMAXnetwork.

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

6. Conclusions
WiMAXoperatorsthathavedecidedtomovetoLTEfaceawiderangeofoptionsinhowtotransitiontothenewtechnology,andhow quicklytodosointermsofbothRANequipmentandsubscriberdevices.IntheTCOmodelpresentedinthispaper,wecompared thetransitioncostsforbothinfrastructureanddevicesintwocases:oneinwhichtheoperatorusesdevicesthatoperateinasingle mode,eitherWiMAXorLTE,andtheotherinwhichtheoperatorusesdualmode,singlechipsetdevicesthatsupportbothWiMAX andLTEduringthetransition.Weassumedthattheoperatorcompletesthetransitionintwoyearsandthatbytheendoftheperiod ithas1.9millionsubscribers,allusingtheLTEnetworkand63%usingsmartphones. OuranalysisshowsthatanoperatorthatadoptsdualmodedevicestheyearbeforetheLTEnetworkislaunchedcanachievea cumulativecostsavingsof4%bytheendofYear5.Evenmoreimportant,dualmodedevicesprovidecostsavingsof19%duringYear 2,allowingoperatorstodeploytheRANinfrastructuremoregraduallyandtoreplacesubscriberdevicesorganically,allofwhich improvescashflowduringthetransition.TheresultsaresummarizedinTable4. ThetransitiontoLTEwidenstheaddressablemarketandbringsnewbusinessopportunitiestoWiMAXoperators,butitwillalso imposeaburdenonoperatorsfinancialandoperationalresources.DualmodedevicesgiveWiMAXoperatorstheflexibilitytoreduce theimpactofthetransitiontoLTEbydilutingitthroughtimeandminimizeitsimpactonsubscribers. Table4.Comparisonofsinglemodeanddualmodecases Singlemodedevicescase Lowercostperdevice Forcedreplacementofdevicesasaonetimeoccurrence, butsubsidiesmayberequiredtoavertchurn SuitableforveryfasttransitiontoLTE Highercapexandopexduringinitialtransitionphase Afastertransitionrequireshigherinvestment andmoreresourcesduringinitialpartoftransition Dualmodedevicescase Moreefficientnetworkutilizationduringtransitionperiod Gradualreplacementofdevices, withlimitedornosubsidies SlowertransitiontoLTEispossibleandindeedadvantageous withdualmodedevices Capexandopexareshiftedtowardalaterstage, becausetheWiMAXnetworkresourcescanbeusedlonger Agradual,slowertransitioniseasiertomanage, involveslessrisk,andcostsless

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WhitepaperAsmoothtransitionfromWiMAXtoLTEwithdualmodedevices

AboutSenzaFili

SenzaFiliprovidesadvisorysupportonwirelessdatatechnologiesandservices.AtSenzaFiliwehavein depthexpertiseinfinancialmodeling,marketforecastsandresearch,whitepaperpreparation,business plansupport,RFPpreparationandmanagement,duediligence,andtraining.Ourclientbaseis internationalandspanstheentirevaluechain:clientsincludewireline,fixedwirelessandmobile operators,enterprisesandotherverticalplayers,vendors,systemintegrators,investors,regulators,and industryassociations. Weprovideabridgebetweentechnologiesandservices,helpingourclientsassessestablishedand emergingtechnologies,leveragethesetechnologiestosupportneworexistingservices,andbuildsolid, profitablebusinessmodels.Independentadvice,astrongquantitativeorientation,andaninternational perspectivearethehallmarksofourwork.Foradditionalinformation,visitwww.senzafiliconsulting.com orcontactusatinfo@senzafiliconsulting.comor+14256574991.

Abouttheauthor

MonicaPaolini,PhD,isthefounderandpresidentofSenzaFili.Sheisanexpertinwirelesstechnologies andhashelpedclientsworldwidetounderstandtechnologyandcustomerrequirements,evaluate businessplanopportunities,markettheirservicesandproducts,andestimatethemarketsizeand revenueopportunityofnewandestablishedwirelesstechnologies.Shehasfrequentlybeeninvitedto givepresentationsatconferencesandhaswrittenseveralreportsandarticlesonwirelessbroadband technologies.ShehasaPhDincognitivesciencefromtheUniversityofCalifornia,SanDiego(US),anMBA fromtheUniversityofOxford(UK),andaBA/MAinphilosophyfromtheUniversityofBologna(Italy).She canbecontactedatmonica.paolini@senzafiliconsulting.com.

2011 Senza Fili Consulting, LLC. All rights reserved. This white paper was prepared on behalf of Sequans Communications. The views and statements expressed in this document are those of Senza Fili Consulting LLC, and they should not be inferred to reflect the position of Sequans Communications. The document can be distributed only in its integral form and acknowledging the source. No selection of this material may be copied, photocopied, or duplicated in any form or by any means, or redistributed without express written permission from Senza Fili Consulting. While the document is based upon information that we consider accurate and reliable, Senza Fili Consulting makes no warranty, express or implied, as to the accuracy of the information in this document. Senza Fili Consulting assumes no liability for any damage or loss arising from reliance on this information. Trademarks mentioned in this document are property of their respective owners.

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